Federal political reporter

Queensland's economic growth will be lower than expected while unemployment will be higher as the state budget suffers a $1.4 billion drop in mining royalties over four years.

Just three months after the Newman government delivered its first budget, Treasurer Tim Nicholls on Thursday unveiled revised forecasts amid worsening global economic conditions and cuts to expected revenue.

The budget update shows the operating budget deficit is set to deteriorate to about $6.7 billion this financial year, compared with nearly $6.3 billion outlined in the September budget.

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Revenue in 2012-13 will decline by $659 million to about $41.6 billion, which the government argues reflects lower mining royalties and federal government cuts to expected payments to Queensland.

Total revenue has been downgraded by $2.6 billion over the same period including a $756 million write-down in expected federal government payments for specific purposes to Queensland, according to the state government.

Royalties are expected to be nearly $1.4 billion lower over the four-year budget cycle.

The government points to weaker outlook for trading partners and lower volumes and prices for coking coal.

The government insists the reduced coal revenue is "not attributable" to the increases to Queensland government royalty rates unveiled in the September budget.

Mr Nicholls said the royalties increases had been designed to ensure the higher rate only took effect when prices recovered to higher levels.

The government says despite the revenue write-downs, it has remained committed to fiscal discipline and is implementing the $7.8 billion in savings outlined in the September budget.

The budget update shows expenses are about $1.1 billion lower over the budget year and the forward estimates than forecast at the time of the budget.

Mr Nicholls stood by his previous assurances that the cuts to 14,000 public service positions, outlined in the September budget, were the extent of the “fiscal repair task” and he sought to hose down talk of further cuts.

Growth takes a hit

He brushed aside talk the public service cuts may be having an effect on growth, saying the state would be in a “much worse position” to deal with the revenue write-downs if it had not taken such action.

Queensland economic growth in 2012-13 is now expected to be 3.75 per cent, down from 4 per cent forecast in the budget.

Growth in 2013-14 has also been revised down from 3.75 per cent to 3.5 per cent.

Mr Nicholls said he was hopeful Queensland’s growth would be the second highest in the nation, behind Western Australia.

The budget update papers point to a weakening in labour market conditions in Queensland, saying weaker global outlook had seen business remain cautious and business confidence deteriorate.

“There is an era of cautious consumerism at the moment,” Mr Nicholls said.

The budget update papers say employment this financial year is expected to grow by only 0.25 per cent, down from 0.75 per cent in the budget, while the figure next financial year has been cut to 2.25 per cent (0.25 percentage points lower).

The expected unemployment rate this financial year will be 6.25 per cent, up from 6 per cent forecast in the budget, and 6 per cent next financial year, up from 5.75 per cent predicted in the budget.

Mr Nicholls was reluctant to comment on whether government-owned corporations would also shave staff numbers, saying those corporations were controlled by their own boards.

Slow take-up of new building grant

The budget papers also reveal the Newman government’s $15,000 First Home Owner Construction Grant, introduced on September 12, had seen just 126 grants paid up to the end of November.

However, Mr Nicholls said the nature of the scheme meant it would take time for interest in the scheme to be reflected in actual payments of the grant.

He said the application form had been downloaded 1500 times.

In a bid to boost the take-up rate, the government has decided to launch an advertising campaign next year promoting the scheme.

Mr Nicholls was tight-lipped as to whether the unreleased draft of the next Peter Costello-led commission of audit report recommended asset sales.

The Treasurer said the government’s position remained that it would not pursue asset sales without taking a proposal to voters at an election to seek a specific mandate.

“The government hasn’t made any decision in relation to asset sales and nor have we considered which ... if any are to be sold,” he said.

Mr Nicholls said the commission of audit’s first report had outlined two ways to make in-roads into the state’s debt levels – either continue to spend less than earnings over a long period of time, or cut borrowings by selling assets.

Spat over federal government 'cuts'

The state budget update document says the federal government has cut a net $756 million in payments for specific purposes to Queensland over the four-year budget period, largely in the areas of health and education.

It says commonwealth national health reform funding in 2012-13 is $103 million lower than what was expected when the state budget was delivered in September – reflecting a reduction of $63 million relating to this financial year and a repayment by Queensland of $40 million linked to last financial year.

The Newman government disputes revised population data used to calculate the changes and says it will be hard for Health and Hospital Services to manage the reduced funds given the state budget had already foreshadowed “significant efficiency and productivity improvement savings”.

But Federal Treasurer Wayne Swan said commonwealth payments were not being reduced and accused Mr Nicholls of trying to divert blame for his own cuts.

“The budget papers prove commonwealth payments to Queensland are increasing by 24 per cent over the next four years – from $17.83 billion in 2012-13 to $22.15 billion in 2015-16,” Mr Swan said in a statement.

“It’s about time Mr Nicholls stopped pointing the finger at everyone else and started taking responsibility for his own budget.”

Mr Nicholls said the revenue write-downs would not prevent a return to surplus in 2014-15 and debt would hit about $82.5 billion in 2015-16, $1.1 billion lower than expected at the time of the September budget.

The Newman government's September budget predicted a slim $17 million operating surplus in 2013-14, but this has been revised down to a $783 million operating deficit - with the state on track to achieve an operating suplus of nearly $2.7 billion in 2014-15.

Mr Nicholls said the state's fiscal balance - which is a broader measure than the traditional operating balance because it includes more categories of spending - would still be achieved in 2014-15 as promised.

He said the government was determined to fix the state’s finances.

“Unemployment continues to be below the 20-year average of 6.9 per cent,” Mr Nicholls said in a statement.

“The Newman government remains committed to reducing unemployment to 4 per cent over six years.”

42 comments

Getting Qld back on track

Commenter

Citizen X

Date and time

December 20, 2012, 1:48PM

back on track to where? i'm yet to hear from this "government" as to where we are actually going apart from the 4 pillars which have vague descriptions of deliverables and indicators - nothing tangible. but what do you expect from General Disaster and his crew? more LNP muck to add to the growing pile of lies from an inept and feckless brand.

Commenter

bne

Date and time

December 20, 2012, 2:34PM

Back on the track to pre 1959 environmental protections, back on track to 1970's levels of civil liberties and back on track to 1930's level of wealth.

Commenter

Citizen X

Date and time

December 20, 2012, 3:56PM

This is all their own work! The Lnp cannot blame this on Labor. The growth forecasts are now down 1.25% on the May treasury forecasts. Add to this the growth in unemployment from 6 to 6.25% and the outlook for this state is grim. The blaming of the mining receipts is a lie as is most of the LNP figures. Mining only makes up about 10% of the state's GDP. The majority comes from services which makes up in excess of 75% of the state's GDP. Guess where the LNP government is cutting. Services. The full effect of the PS cutbacks are yet to flow into the state's economy. The full effect of the PS cutbacks are yet to be seen in the unemployment figures! The inevitable flowon to the private sector employment is yet to effect the state. The latest financial figures for the state have shown a contraction of 1.6%. This may not have a full flowon effect to GDP but this state is heading for a severe economic setback. This is all the fault of the LNP. Tim Nuckles reporting od a state debt of $84b is the same projection that Labor put forward. Where is the reduction? The $100b projction by Nuckles and Costello, widely quoted in the CanCourier Mail was if no check on spending was effected. Labor had already put checks into the system and their/treasury projection was for a debt of $84b! What has changed? Look out Queenslanders there is more to come from these economic vandals!

Commenter

Pollyho

Date and time

December 20, 2012, 7:50PM

Unemployment rate up! Growth rate down! A drop in Credit Rating from AA+ to BB-, a much bigger drop than AAA to AA+. Blaming the Federal Government in advance for inability of the Qld Health system to cope in 2013 despite an increase in Federal funding by 24% over the next 4 years.

Nicholls is blaming this poor forecast on the Global Economic Crises. However the LNP would not allow a combination of natural disasters ( 2 cyclones and a flood) plus the Global Economic Crisis as a reason for the modest budget deficit attained by the Bligh government.

Nicholls says the budget will be in the black in 2014. Bligh's budget papers also predicted a surplus in 2014. The difference in the approaches by the LNP and Labor, though, is that the LNP believe in austerity, which all economists will tell you, reduces the amount of money in circulation. Austerity has resulted in a very reduced growth rate for Queensland and the highest unemployment in decades. Queensland has a depressed economy. People are not spending. People are pessimistic. Most small businesses are struggling and some in liquidation.

The future is bleak and Nicholls is trying hard to keep selling the unsellable!

Commenter

TiredOfSpin

Date and time

December 20, 2012, 1:53PM

Tired of spin you know little about economics. Austerity by the government doesn't reduce the amount of money in circulation, it just changes the Private/Public mix.

Commenter

mh

Location

Brisbane

Date and time

December 20, 2012, 2:20PM

Yes it does, mh. With all the sackings and gloom and doom reports from Nicholls people are going to be spending less - because they don't know who this governent will k on next. OK people's savings are in the bank but it wont be coming out, so restaurants, retailers - you know, the small businesses the LNP apparently loves and supports - are going to suffer more.

Another day, another Newman government disaster.

Commenter

drovers cat

Location

an alleyway

Date and time

December 20, 2012, 2:30PM

What a bunch of hypocrites!! Tied of Spin is absolutely right..

"Nicholls is blaming this poor forecast on the Global Economic Crises. However the LNP would not allow a combination of natural disasters ( 2 cyclones and a flood) plus the Global Economic Crisis as a reason for the modest budget deficit attained by the Bligh government"

The floods and cyclones alone cost the state $3.5 billion dollars in repairs and lost revenue.

Now despite the fare-weather nature of the LNP and its supporters there was a thing called the GFC (Great Financial Crisis) see the word "financial" that means income and investment and by the way it was not caused by the ALP anywhere!!! This GFC reduced the amount of money coming into the QLD treasury then we were hit with 2 cyclones and 2 floods across the state. To repair the damage to roads, rail, bridges govt buildings etc money need to be spent this needed to be borrowed.

There is debt, however, it is not $100billion that is a lie and you know it, Clive (blessings be apon him) told us 2 tunnels and the LNP are lying to Queenslanders about this debt and now we see this week a group of Shiny happy people holding hands with 2 tunnels saying the future is bright after all and we are not like Spain. HYPOCRITES!!!!

Commenter

VonBB

Location

Coasta Del Palmer

Date and time

December 20, 2012, 2:49PM

Furthermore when the Gov't borrows to spend it reduces the availability of money for the private sector. In theory, because the private sector is generally more efficient, Gov't austerity should actually boost economic activity in the long term.

Commenter

mh

Location

Brisbane

Date and time

December 20, 2012, 2:53PM

mh I guess that's why austerity has worked so well anywhere it's been applied.

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